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Significant Accounting Policies | 3 Months Ended
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Mar. 31, 2018
Accounting Policies [Abstract] |
Significant Accounting Policies | Significant Accounting Policies The Variable Interest Entity (VIE) Arrangements Laureate consolidates in its financial statements certain internationally based educational organizations that do not have shares or other equity ownership interests. Although these educational organizations may be considered not-for-profit entities in their home countries and they are operated in compliance with their respective not-for-profit legal regimes, we believe they do not meet the definition of a not-for-profit entity under GAAP, and therefore we treat them as "for-profit" entities for accounting purposes. These entities generally cannot declare dividends or distribute their net assets to the entities that control them. Under ASC 810-10, "Consolidation," we have determined that these institutions are VIEs and that Laureate is the primary beneficiary of these VIEs because we have, as further described herein: (1) the power to direct the activities of the VIEs that most significantly affect their educational and economic performance and (2) the right to receive economic benefits from contractual and other arrangements with the VIEs that could potentially be significant to the VIEs. We account for the acquisition of the right to control a VIE in accordance with ASC 805, "Business Combinations." As discussed further in Note 5, Dispositions, the number of our VIE institutions was reduced by one in January 2018 following the sale of LEI Lie Ying Limited (LEILY). The VIEs in Brazil and Mexico comprise several not-for-profit foundations that have insignificant revenues and operating expenses. Selected Consolidated Statements of Operations information for VIEs was as follows, net of the charges related to the above-described contractual arrangements:
For the three months ended March 31, | 2018 |  | 2017
Selected Statements of Operations information: |  |  |
Revenues, by segment: |  |  |
Brazil | $ | — |  |  | $ | — |
Mexico | — |  |  | — |
Andean & Iberian | 55,036 |  |  | 48,311 |
Central America & U.S. Campuses | 15,140 |  |  | 15,375 |
EMEAA | 61,196 |  |  | 66,213 |
Revenues | 131,372 |  |  | 129,899 |
Depreciation and amortization | 11,023 |  |  | 12,823 |
Operating (loss) income, by segment: |  |  |
Brazil | (18 | ) |  | (21 | )
Mexico | (157 | ) |  | (191 | )
Andean & Iberian | (39,262 | ) |  | (41,923 | )
Central America & U.S. Campuses | (305 | ) |  | 1,055 |
EMEAA | 12,771 |  |  | 11,887 |
Operating loss | (26,971 | ) |  | (29,193 | )
Net loss | (22,468 | ) |  | (20,112 | )
Net loss attributable to Laureate Education, Inc. | (22,728 | ) |  | (20,936 | )
The following table reconciles the Net income (loss) attributable to Laureate Education, Inc. as presented in the table above, to the amounts in our Consolidated Statements of Operations:
For the three months ended March 31, | 2018 |  | 2017
Net income (loss) attributable to Laureate Education, Inc.: |  |  |
Variable interest entities | $ | (22,728 | ) |  | $ | (20,936 | )
Other operations | (30,590 | ) |  | 30,707 |
Corporate and eliminations | 222,197 |  |  | (132,578 | )
Net income (loss) attributable to Laureate Education, Inc. | $ | 168,879 |  |  | $ | (122,807 | )
The following table presents selected assets and liabilities of the consolidated VIEs. Except for Goodwill, the assets in the table below include the assets that can be used only to settle the obligations for the VIEs. The liabilities in the table are liabilities for which the creditors of the VIEs do not have recourse to the general credit of Laureate. Selected Consolidated Balance Sheet amounts for these VIEs were as follows:
| March 31, 2018 |  | December 31, 2017
| VIE |  | Consolidated |  | VIE |  | Consolidated
Balance Sheets data: |  |  |  |  |  |  |
Cash and cash equivalents | $ | 199,609 |  |  | $ | 479,011 |  |  | $ | 231,940 |  |  | $ | 468,733 |
Current assets held for sale | — |  |  | 57,990 |  |  | 22,246 |  |  | 102,623 |
Other current assets | 338,271 |  |  | 956,214 |  |  | 153,129 |  |  | 717,498 |
Total current assets | 537,880 |  |  | 1,493,215 |  |  | 407,315 |  |  | 1,288,854 |
Goodwill | 198,683 |  |  | 1,942,335 |  |  | 192,230 |  |  | 1,954,666 |
Tradenames | 96,949 |  |  | 1,280,617 |  |  | 110,577 |  |  | 1,295,614 |
Other intangible assets, net | — |  |  | 34,095 |  |  | — |  |  | 35,927 |
Long-term assets held for sale | — |  |  | 311,231 |  |  | 185,139 |  |  | 392,391 |
Other long-term assets | 541,967 |  |  | 2,455,265 |  |  | 524,318 |  |  | 2,424,271 |
Total assets | 1,375,479 |  |  | 7,516,758 |  |  | 1,419,579 |  |  | 7,391,723 |
Current liabilities held for sale | — |  |  | 103,340 |  |  | 64,895 |  |  | 176,719 |
Other current liabilities | 425,234 |  |  | 1,488,426 |  |  | 276,252 |  |  | 1,198,030 |
Long-term liabilities held for sale | — |  |  | 86,853 |  |  | 41,732 |  |  | 94,407 |
Long-term debt and other long-term liabilities | 71,185 |  |  | 3,608,491 |  |  | 66,682 |  |  | 3,921,288 |
Total liabilities | 496,419 |  |  | 5,287,110 |  |  | 449,561 |  |  | 5,390,444 |
Total stockholders' equity | 879,060 |  |  | 1,767,473 |  |  | 970,018 |  |  | 1,587,282 |
Total stockholders' equity attributable to Laureate Education, Inc. | 878,689 |  |  | 1,772,924 |  |  | 948,966 |  |  | 1,575,164 |
On January 24, 2018, a new Higher Education Law (the New Law) was passed by the Chilean Congress. On March 27, 2018, the Constitutional Court declared unconstitutional Article 63 of the New Law, which would have prohibited for-profit organizations such as Laureate from controlling the boards of universities in Chile. As the Constitutional Court did not release its opinion until April 26, 2018, signature and enactment of the New Law is expected to occur in the second quarter of 2018. Among other things left intact by the Constitutional Court, the New Law prohibits conflicts of interests and related party transactions with certain exceptions, including the provision of services that are educational in nature or essential for the university's purposes. The New Law provides for a transition period. The incoming Chilean presidential administration, which took office on March 11, 2018, has the responsibility to implement the new legislative mandates and compliance processes. The Company is currently reviewing the impact the New Law will have on its Chilean operations, including the extent to which it will affect existing contractual relationships that the Company maintains with the Chilean non-profit universities. As the New Law no longer contains provisions that prohibit Laureate from controlling the boards of the Chilean non-profit universities, but still requires the promulgation of new regulations and procedures that will be applicable to any commercial relationship that the Company has with the Chilean non-profit universities, the Company has determined that it will continue to consolidate the three Chilean non-profit universities, which are accounted for as variable interest entities, and its Chilean real estate subsidiary. While we believe that all of our institutions in Chile are operating in full compliance with Chilean law, we cannot predict the extent or outcome of any educational reforms that may be implemented in Chile. The Company does not believe the New Law will change its relationship with its two tech/voc institutions in Chile that are for-profit entities. However, it is possible that the Chilean government will adopt additional laws that affect for-profit tech/voc institutions and their relationships with their owners. Depending upon how these reforms are defined and implemented, there could be a material adverse effect on our financial condition and results of operations. Allowance for Doubtful Accounts Receivables are deemed to be uncollectible when they have been outstanding for two years, or earlier when collection efforts have ceased, at which time they are written off. Prior to that, Laureate records an allowance for doubtful accounts to reduce our receivables to their net realizable value. Our allowance estimation methodology is based on the age of the receivables, the status of past-due amounts, historical collection trends, current economic conditions and student enrollment status. In the event that current collection trends differ from historical trends, an adjustment is made to the allowance account and bad debt expense. The reconciliations of the beginning and ending balances of the Allowance for doubtful accounts were as follows:
For the three months ended March 31, | 2018 |  | 2017
Balance at beginning of period | $ | 204,252 |  |  | $ | 196,270 |
Additions: charges to bad debt expense | 22,153 |  |  | 16,502 |
Additions: charges to other accounts (a) | — |  |  | 503 |
Deductions (b) | (24,883 | ) |  | (17,571 | )
Balance at end of period | $ | 201,522 |  |  | $ | 195,704 |
(a) Charges to other accounts includes reclassifications. (b) Deductions includes accounts receivable written off against the allowance (net of recoveries), reclassifications, and foreign currency translation. The beginning and ending balances of the Allowance for doubtful accounts include the current portion, as shown on the face of Consolidated Balance Sheets, in addition to the noncurrent portion that is included in Notes receivable, net on the Consolidated Balance Sheets. Recently Adopted Accounting Standards Accounting Standards Update (ASU) No. 2014-09, (ASU 2014-09), Revenue from Contracts with Customers (Topic 606) On May 28, 2014, the Financial Accounting Standards Board (FASB) issued ASU 2014-09, which, along with amendments issued in 2015 and 2016, supersedes the revenue recognition requirements in Accounting Standards Codification (ASC) 605, ‘‘Revenue Recognition’’ and most industry-specific guidance. The core principle of ASU 2014-09 is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. We adopted Topic 606 as of January 1, 2018 using the modified retrospective transition method and elected to apply the standard only to contracts that are not completed as of that date. We recorded a net increase to opening retained earnings of approximately $1,400 as of January 1, 2018 due to the cumulative impact of adopting Topic 606, with the impact primarily related to the deferral of costs to obtain a contract which were previously expensed as incurred. The impact to revenues as a result of applying Topic 606 was an increase of $6,633 for the three months ended March 31, 2018. In accordance with the requirements under Topic 606, the disclosure of the impact of adoption on our Consolidated Statement of Operations and Consolidated Balance Sheet was as follows:
| For the period ended March 31, 2018
| As Reported | Balances Without Adoption of ASC 606 | Effect of Change Higher/(Lower)
Statement of Operations data: |  |  |
Revenues | $ | 885,288 |  | $ | 878,655 |  | $ | 6,633 |
Costs and Expenses: |  |  |
Direct costs | 865,446 |  | 868,561 |  | (3,115 | )
Income tax expense | (2,532 | ) | (2,502 | ) | 30 |
Net income | 171,545 |  | 161,827 |  | 9,718 |
| As of March 31, 2018
| As Reported | Balances Without Adoption of ASC 606 | Effect of Change Higher/(Lower)
Balance Sheet data: |  |  |
Assets: |  |  |
Deferred costs, net | 67,061 |  | 62,528 |  | 4,533 |
Liabilities: |  |  |
Deferred revenue and student deposits | 675,455 |  | 682,088 |  | (6,633 | )
Deferred income taxes | 293,957 |  | 293,927 |  | 30 |
Equity: |  |  |
Accumulated deficit | (772,283 | ) | (783,419 | ) | 11,136 |
ASU No. 2016-15 (ASU 2016-15), Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments In August 2016, the FASB issued ASU 2016-15 in order to address the diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows under Topic 230, Statement of Cash Flows, and other Topics. This standard addresses the following eight specific cash flow issues: debt prepayment or debt extinguishment costs; settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing; contingent consideration payments made after a business combination; proceeds from the settlement of insurance claims; proceeds from the settlement of corporate-owned life insurance policies (COLIs) (including bank-owned life insurance policies (BOLIs)); distributions received from equity method investees; beneficial interests in securitization transactions; and separately identifiable cash flows and application of the predominance principle. The amendments in this update apply to all entities, including both business entities and not-for-profit entities that are required to present a statement of cash flows under Topic 230. The Company adopted this standard beginning January 1, 2018, and it did not have a material effect on our Consolidated Financial Statements for the periods presented. ASU No. 2016-16 (ASU 2016-16), Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory In October 2016, the FASB issued ASU 2016-16 in order to improve the accounting for income tax consequences for intra-entity transfers of assets other than inventory. Prior to adopting this ASU, the recognition of current and deferred income taxes for an intra-entity transfer was prohibited until the asset was sold to a third party. The amendments in this ASU state that an entity should recognize income tax consequences of an intra-entity transfer when the transfer occurs. This aligns the recognition of income tax consequences for intra-entity transfers of assets with International Financing Reporting Standards (IFRS). Laureate adopted ASU 2016-16 effective January 1, 2018 and recorded a cumulative-effect adjustment to retained earnings of approximately $3,700. ASU No. 2016-18 (ASU 2016-18), Statement of Cash Flows (Topic 230): Restricted Cash In November 2016, the FASB issued ASU 2016-18 in order to address the diversity that exists in the classification and presentation of changes in restricted cash on the statement of cash flows under Topic 230, Statement of Cash Flows. The amendments in this ASU require that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The amendments in this ASU apply to all entities that have restricted cash or restricted cash equivalents and are required to present a statement of cash flows under Topic 230. This ASU was adopted by Laureate beginning January 1, 2018 and resulted in a change in presentation within the Consolidated Statements of Cash Flows. As required, Laureate retrospectively applied the guidance to the prior period presented, which resulted in an increase of $3,432 and $1,114 in operating and investing cash flows, respectively, on the Consolidated Statement of Cash Flows for the three months ended March 31, 2017. As required by the ASU, we have provided a reconciliation from cash and cash equivalents as presented on our Consolidated Balance Sheets to cash, cash equivalents, and restricted cash as reported on our Consolidated Statements of Cash Flows. See Note 20, Supplemental Cash Flow Information, for this reconciliation, as well as a discussion of the nature of our restricted cash balances. ASU No. 2017-07 (ASU 2017-07), Compensation - Retirement Benefits (Topic 715) In March 2017, the FASB issued ASU 2017-07 in order to improve the presentation of net periodic pension cost and net periodic post retirement benefit cost. Prior to adoption of this ASU, these costs comprised several components that reflected different aspects of an employer's financial arrangements as well as the cost of benefits provided to employees, and were aggregated for reporting purposes. Under the amendments in this ASU, the service cost component of net periodic benefit cost is disaggregated and reported in the same line item(s) as other compensation costs arising from services rendered during the period, and the remaining components are presented on the income statement separately from the service cost component and outside a subtotal of income from operations, if presented. Laureate adopted ASU 2017-07 on January 1, 2018. Since the effect of ASU 2017-07 on prior periods presented was insignificant, we did not revise the Consolidated Statement of Operations for the three months ended March 31, 2017. For the three months ended March 31, 2018, the service cost component is included in Direct costs on our Consolidated Statement of Operations and the other components of net periodic benefit cost/(income), which totaled $237 for the three months ended March 31, 2018, are included in Other income, net on our Consolidated Statement of Operations. Recently Issued Accounting Standards Not Yet Adopted ASU No. 2016-02 (ASU 2016-02), Leases (Topic 842) On February 25, 2016, the FASB issued ASU 2016-02. Lessees will need to recognize on their balance sheet a right-of-use asset and a lease liability for virtually all of their leases (other than leases that meet the definition of a short-term lease). The liability will be equal to the present value of the lease payments. The asset will be based on the liability, subject to adjustment, such as for initial direct costs and uneven rent payments. For income statement purposes, the FASB retained a dual model, requiring leases to be classified as either operating or finance. Operating leases will result in straight-line expense (similar to current operating leases) while finance leases will result in a front-loaded expense pattern (similar to current capital leases). Classification will be based on criteria that are largely similar to those applied in current lease accounting, but without explicit bright lines. The standard is effective for Laureate beginning January 1, 2019. The new standard must be adopted using a modified retrospective transition and provides for certain practical expedients. Transition will require application of the new guidance at the beginning of the earliest comparative period presented. We have completed our diagnostic assessment and have established a cross-functional implementation team which is in the process of identifying changes to our accounting policies, business processes, systems and internal controls in preparation for the implementation. We anticipate that ASU 2016-02 will have a material impact on our Consolidated Balance Sheets, as we will record significant asset and liability balances in connection with our leased properties. We are still evaluating the impact to our Consolidated Statements of Operations. We do not currently plan to early adopt this ASU.

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